What is the effect of a Postnuptial Agreement on Division of Assets

What is the effect of a Postnuptial Agreement on Division of Assets

Postnuptial Agreements & Division of Assets

Case Commentary - AUA v ATZ [2016] SGCA 41

In the recent Court of Appeal case of AUA v ATZ [2016] SGCA 41, the Court examined the weight which would be ascribed to the terms of a postnuptial agreement concluded by the parties in contemplation of a divorce relating to the division of matrimonial assets. Prior to the assessment of the weight ascribed to the agreement, the Court must first ascertain the following:

1. That the postnuptial agreement must be freely and voluntarily entered into by the parties; and

2. That the postnuptial agreement is an agreement within the meaning of Section 112(2)(e) of the Women’s Charter (“the Charter”).

At the first instance, the High Court departed from the division in the deed of separation (“Deed”) as it did not appear to take into account the continuing role that the wife would play in caring for the child from the date of the Deed until the date of final judgment, and therefore concluded that the Deed did not reflect a fair and equitable distribution. However, the Court of Appeal disagreed with the basis on which the High Court varied the agreed distribution in the Deed for the following three reasons:

1. The parties’ post-Deed activities should not be taken into account in determining what the appropriate division of their matrimonial assets;

2. The wife’s contributions post the conclusion of the Deed was taken into consideration when parties entered into the Deed; and

3. It is a matter of common sense and justice that the existence of an agreement for the division of matrimonial assets in contemplation of divorce should be accorded due weight.

A key issue that arose in AUA v ATZ is the determination of the cut-off date for determining the parties’ contributions to the marriage when a post-nuptial agreement comes into play. The Court of Appeal held that the operative date ought to be the date of the conclusion of the Deed instead of the date of final judgment because that was when the marriage effectively came to an end.

Upon examination of the Deed, it was clear that the parties’ marital relationship had ended with the conclusion of the Deed pursuant to the principles set out in ARY v ARX and anor appeal [2016] 2 SLR 686: (a) there is no longer a matrimonial home; (b) there is no consortium vitae – the parties were to live complete separate lives; and (c) neither party had conjugal rights. Furthermore, it was clear that parties were waiting for time to elapse so either one could file for divorce on the ground of three years’ separation. The Court was of the view that the wife would have known that the Deed was structured in such a way that took into account that she would be the primary caregiver to the child.

Secondly, the Deed was the product of lengthy negotiations between the parties who were both legally represented and that the parties would have addressed their minds to the wife’s contributions in the agreed division of their matrimonial assets. The Court was satisfied that there were no potential vitiating factors and that the agreement would reflect what parties thought was fair and reasonable.

Furthermore, the Court was cautious to vary the Deed as it is a matter of common sense and justice that the existence of such an agreement should be accorded due weight when determining a just and equitable distribution. In AUA, parties have negotiated rationally and have full knowledge of their respective contributions to the marriage and have agreed on what parties view as just and equitable.

For the reasons stated above, the Court of Appeal concluded that the terms of the Deed in relation to the division of assets would be a just and equitable outcome.

What this case means for you

If you enter into a postnuptial agreement with your spouse freely and especially with the benefit of legal representation, and the agreement relates to division of assets, it may be difficult for you to persuade the courts to depart from the postnuptial agreement. The courts may take the position that parties have negotiated rationally and have agreed on what parties view as a fair settlement.

It is therefore advisable that you should not sign if you are not happy with the proposed terms of a postnuptial agreement, as it may be difficult to re-open arguments that you should be entitled to more for asset division.